Tax Refund and Preparer Scams

It's tax preparation season, and the fraudsters know this, and are ready, willing, and able to steal what is rightfully yours. Here are some of the more common scams involving tax filing:

"Special Tax Refund for African Americans" - Thousands of African-Americans have been misled by people offering to file for tax credits or refunds related to reparations for slavery. There is no such provision in the tax law. Some unscrupulous promoters have encouraged clients to pay them to prepare a claim for this refund. But the claims are a waste of your money. Plus, those who file subsequent claims can be subject to a $500 frivolous return penalty.

"Social Security Tax Scam" - Taxpayers shouldn’t fall victim to a scam offering them refunds of the Social Security taxes they have paid during their lifetimes. The scam works by the victim paying a "paperwork" fee of $100, plus a percentage of any refund received, to file a refund claim with the IRS. This hoax fleeces the victims for the up front fee. The law does not allow such a refund of Social Security taxes paid. The IRS processing centers are alert to this hoax and have been stopping the false claims.

"IRS 'Agent' Comes to Your Door to Collect" - First, do not let anyone into your home unless they identify themselves to your satisfaction. IRS special agents, field auditors, and collection officers carry picture IDs and will normally try to contact you before they visit. If you think the person on your doorstep is an impostor, lock your door and call the local police. To report IRS impostors, call the Treasury Inspector General’s Hotline at 1-800-366-4484.

"You have an additional refund coming to you!" - The unwary victim will receive an email, promising an extra amount from the IRS, that can be refunded directly to your debit or credit card. This "phish" tells you that the IRS owes you several hundred dollars, and offers you a web link from which you can allegedly claim your tax refund. But the link in the email will bounce you off a US Government Web site onto a site owned by the criminals, who are ready and waiting to steal your credit card details, Social Security Number and other personal information. This is more advanced than the typical phish, because the web link really does, at first, take you to the real tax benefit Web site. But then, the clicker will be bounced in the direction of the phisher. The "Refund Status Screen" inside the phishing email may look something like this:

"I can get you a BIG refund... for a fee." - Refund scheme operators may approach you wanting to "borrow" your Social Security Number or give you a phony W-2 so it appears that you qualify for a big refund. They may promise to split the refund with you, but the IRS catches most of these false refund claims before they go out. And when one does go out, the participant usually ends up paying back the refund along with stiff penalties and interest.

Helpful Hints When Choosing a Return Preparer

• Avoid tax preparers who claim they can obtain larger refunds than other preparers.
  
  
• Avoid preparers who base their fee on a percentage of the amount of the refund.
  
  
• Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
  
  
• Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
  
  
• Review your return before you sign it and ask questions on entries you don't understand.
  
  
• No matter who prepares your tax return, you (the taxpayer) are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
  
  
• Find out the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
  
  
• Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
  
  
• Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?

Where Do You Report Suspected Tax Fraud Activity?
If you suspect tax fraud, you should report this activity to your nearest IRS office. This information can be communicated in writing or by phone. You can contact the IRS by phone at
(800) 829-0433.